Real estate & construction.

• Author: Larew, Sue
• Position: MARKET REMAINS STRONG

In spite of the global financial markets and economic concerns, the U.S. economy continues to grow. When it comes to determining the strength of the economy, the housing market is a true litmus test of the economic health of a community.

In Montana, the housing market remains strong due to the reduction of unemployment. Because income is up, we are seeing an increase of new households--from new home purchases to new home construction, as well as a rise of housing developments in urban areas. Homebuilding is expected to continue its growth through 2016. In fact, there is a supply and demand issue for consumers looking for homes in the $250,000 (and less) price range. The stronger economy has created an increase in state to-state migration, especially in the oil and gas industry. Today, we are experiencing some out-migration as a result of the drop in oil prices and the slowdown of drilling. As a result, the need for man camps and additional housing has all but disappeared.

SINGLE-FAMILY CONSTRUCTION

In Montana, construction of single-family housing starts slipped last summer, however, construction is up 14.9 percent nationally. Montana shows 2.5 percent growth in new home construction, but the value of these homes is up 5.99 percent. This begs the question: are builders simply constructing more expensive homes or has the cost to build new homes increased?

The U.S. is on track to build 552,000 new homes this year, far from the over 1 million new homes built per year just 10 years ago. Nationally, new home sales are up 5 percent, but we are seeing a slowdown in the issuance of building permits in comparison to last year. Even with growth, new home sales are falling further behind the new household generation, which is causing a growth in multi-family construction. This has also lead to dramatic rent increases.

MULTI-FAMILY CONSTRUCTION

Nationally, multi-family construction continues to grow along with a large increase in rental prices. This is due to job growth and new household formation as a result of the increase in state-to-state migration. The emergence of...